2024 (3) TMI 885 - HC - Income Tax

Validity of reopening notice u/s 148 and draft assessment order issued u/s 144C - Shares transferred to foreign company Mauritius - HELD THAT - On examining the notice u/s 148, and the subsequent notices u/s 142(1), it is evident that the AO decided to re-open the assessment on the basis of information gathered while undertaking assessment in respect of Info-Drive India Ltd. The annexure to notice discloses that share transfers took place during the financial year 2015-16 and eventually 10,000 shares were transferred to Infodrive Mauritius. The said document appears to indicate that 5000 shares were transferred by the petitioner to Mr.V.N.Sesharigi Rao and those shares were eventually acquired by Infodrive Mauritius. Since this transaction was not disclosed by the petitioner in his return of income, it is possible that the capital gains arising therefrom escaped assessment. Thus, there is some basis for re-opening the assessment. Petitioner has placed additional documents on record. These documents appear to indicate that the petitioner transferred the shares to Mr.V.N.Sesharigi Rao on 12.02.2015. If the said documents are found to be valid and genuine on verification, they indicate that the share transfer took place during the financial year 2014-15 and not 2015-16. This would have a material impact on the re-assessment proceedings initiated by the Assessing Officer. Consequently, the petitioner should be provided an opportunity to place these documents for consideration by the Assessing Officer before the Assessing Officer prepares the draft assessment order. In order to facilitate this process, the draft assessment order is liable to be set aside and the matter is required to be remanded to the AO. Accordingly, the draft assessment order is set aside and the matter is remanded to the Assessing Officer. The petitioner is permitted to file fresh objections and annex all relevant documents within a maximum period of two weeks from the date of receipt of a copy of this order

Summary

Issues involved:
The challenge to the notice under Section 148 of the Income Tax Act and the draft assessment order issued under Section 144C(1) thereof.

Summary:

Issue 1: Notice under Section 148 of the Income Tax Act
The petitioner received a notice under Section 148 followed by notices under Section 142(1) regarding the transfer of shares. The petitioner objected to the notice citing non-compliance with Section 127 procedure. The petitioner raised objections based on the GKN Driveshafts judgment and a Draft Assessment Order was issued under Section 144C after objections were lodged. The petitioner contended that the share transfer did not occur during the relevant financial year as claimed by the Assessing Officer.

Issue 2: Compliance with Objections
The petitioner argued that the Assessing Officer failed to consider the objections raised and did not pass a speaking order as required. The petitioner provided documents showing the share transfer to another individual in a different financial year with a different consideration amount, which could impact the assessment proceedings.

Issue 3: Dispute Resolution Panel
The Respondent's counsel argued that the petitioner admitted to the share transfer and could raise objections before the Dispute Resolution Panel. However, the petitioner's counsel contended that the Panel's jurisdiction is limited under Section 144C, emphasizing the need to set aside the draft assessment order for reconsideration based on the objections raised.

Judgment:
Upon examining the documents and contentions, it was found that the share transfer might have occurred in a different financial year than claimed by the Assessing Officer. The petitioner was directed to submit additional documents for verification, and the draft assessment order was set aside for reconsideration. The Assessing Officer was instructed to issue a fresh draft assessment order after considering the petitioner's objections and relevant documents within a specified timeframe.

Conclusion:
The draft assessment order was set aside, and the matter was remanded to the Assessing Officer for further consideration. The petitioner was given an opportunity to submit fresh objections and relevant documents within a specified period, with directions for the issuance of a new draft assessment order thereafter. The case was disposed of with no costs incurred.